Exit Planning is an extremely important concept for business owners.
What is Exit Planning you may ask?
The conventional definition is it is the creation of a plan and strategy to ultimately transfer or liquidate the ownership of a business. This definition, however, is too rigid in our opinion and focuses on the end goal rather than the process. We believe Exit Planning is vital to business owners, even if they are not considering an imminent sale of their business.
The planning done today increases the value in a business tomorrow. Exit Planning or “value creation” is not a one-time event and should always be part of the business strategy.
As Certified Exit Planning Advisors (CEPA), we have leveraged the Exit Planning Institute’s program to expand our knowledge in this area. The following are important points for business owners to consider:
- The Exit Planning process should begin a minimum of 3 years prior to a potential transfer. Value creation is a process that takes time.
- To improve your business, ask yourself every 90 days whether you are figuring out how to grow or whether you are preparing to sell.
- There are numerous exit options. Make sure you understand all of them. There is sometimes value where you do not expect!
- Business attractiveness is not necessarily exit readiness. A business can be attractive to potential buyers, but have a management team or business that is not ready to transfer for a variety of reasons. Determine what is needed to increase readiness.
- Surround yourself with the right advisors and consultants. Build your value creation team. This should consist of professionals such as accountants, attorneys, financial planners, and business brokers all who have experience in Exit Planning.
If you have any questions about the future of your business or know of someone who may find value in a discussion, please let us know!